Abercrombie & Fitch (NYSE:ANF) & GAP (NYSE:GAP) Head-To-Head Analysis

Abercrombie & Fitch (NYSE:ANF) and GAP (NYSE:GAP) are both mid-cap retail/wholesale companies, but which is the superior business? We will contrast the two businesses based on the strength of their earnings, dividends, profitability, institutional ownership, risk, analyst recommendations and valuation.

Profitability

This table compares Abercrombie & Fitch and GAP’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Abercrombie & Fitch	10.76%	47.35%	16.88%
GAP	5.05%	28.89%	6.92%

Analyst Recommendations

This is a summary of recent ratings and target prices for Abercrombie & Fitch and GAP, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Abercrombie & Fitch	0	3	4	0	2.57
GAP	0	3	0	0	2.00

Abercrombie & Fitch presently has a consensus target price of $176.71, suggesting a potential upside of 34.09%. GAP has a consensus target price of $27.00, suggesting a potential upside of 30.00%. Given Abercrombie & Fitch’s stronger consensus rating and higher probable upside, analysts plainly believe Abercrombie & Fitch is more favorable than GAP.

Insider & Institutional Ownership

58.8% of GAP shares are owned by institutional investors. 2.6% of Abercrombie & Fitch shares are owned by insiders. Comparatively, 31.0% of GAP shares are owned by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock will outperform the market over the long term.

Valuation and Earnings

This table compares Abercrombie & Fitch and GAP”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Abercrombie & Fitch	$4.66 billion	1.44	$328.12 million	$9.44	13.96
GAP	$15.17 billion	0.52	$502.00 million	($27.20)	-0.76

GAP has higher revenue and earnings than Abercrombie & Fitch. GAP is trading at a lower price-to-earnings ratio than Abercrombie & Fitch, indicating that it is currently the more affordable of the two stocks.

Dividends

Abercrombie & Fitch pays an annual dividend of $0.80 per share and has a dividend yield of 0.6%. GAP pays an annual dividend of $0.60 per share and has a dividend yield of 2.9%. Abercrombie & Fitch pays out 8.5% of its earnings in the form of a dividend. GAP pays out -2.2% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. GAP is clearly the better dividend stock, given its higher yield and lower payout ratio.

Volatility and Risk

Abercrombie & Fitch has a beta of 1.49, indicating that its stock price is 49% more volatile than the S&P 500. Comparatively, GAP has a beta of 2.35, indicating that its stock price is 135% more volatile than the S&P 500.

Summary

Abercrombie & Fitch beats GAP on 9 of the 16 factors compared between the two stocks.

About Abercrombie & Fitch

Abercrombie & Fitch Co., through its subsidiaries, operates as an omnichannel retailer in the United States, Europe, the Middle East, Asia, the Asia-Pacific, Canada, and internationally. The company offers an assortment of apparel, personal care products, and accessories for men, women, and kids under the Abercrombie & Fitch, abercrombie kids, Hollister, and Gilly Hicks brands. It sells products through its stores, various wholesale. franchise, and licensing arrangements, as well as e-commerce platforms. The company was founded in 1892 and is headquartered in New Albany, Ohio.

About GAP

The Gap, Inc. operates as an apparel retail company. The company offers apparel, accessories, and personal care products for men, women, and children under the Old Navy, Gap, Banana Republic, and Athleta brands. Its products include adult apparel and accessories; and fitness and lifestyle products for use in yoga, training, sports, travel, and everyday activities for women and girls. The company offers its products through company-operated stores, franchise stores, websites, and third-party arrangements. It has franchise agreements to operate Old Navy, Gap, Banana Republic, and Athleta stores and websites in Asia, Europe, Latin America, the Middle East, and Africa. The Gap, Inc. was incorporated in 1969 and is headquartered in San Francisco, California.